By Elise Hansen

Law360 (May 19, 2020, 1:54 PM EDT) -- Vroom, an online platform for buying and selling used cars, has revved up plans for a Latham & Watkins-steered initial public offering to help keep the business going in the face of concerns that it may peter out.

Vroom Inc. said late Monday that between the coronavirus pandemic, its history of operating losses and its negative cash flows, there was "substantial doubt about our ability to continue as a going concern over the next 12 months." The proceeds from the offering will help keep the New York-based company in business, it said.

"Our ability to continue as a going concern is dependent upon us generating sufficient cash flow from operations and obtaining additional capital and financing, including the proceeds from this offering," Vroom said in a filing with the U.S. Securities and Exchange Commission.

Vroom said it hasn't yet determined how many shares it will offer or at what price, although the company used $100 million as a proposed maximum offering size for the purpose of calculating registration fees. The $100 million figure is frequently used as a placeholder in early IPO filings.

Vroom is an e-commerce platform for used cars whose "end-to-end" approach includes financing options, at-home pickup and delivery, according to its website. The company sources used cars from consumers, auctions, rental car companies and deals. It reconditions the vehicles and sells them to consumers nationwide, Vroom's prospectus said.

"The U.S. used-automotive industry is a massive market that is ripe for disruption due to its fragmentation, high level of consumer dissatisfaction, changing consumer buying patterns and lack of ecommerce and technology penetration," the prospectus said.

But Vroom has yet to turn a profit and incurred substantial costs pursuing an aggressive growth strategy last year, according to the SEC filing. The company said it nearly doubled its inventory and reconditioning capacity in 2019 and more than doubled its monthly sales, but the strategy also increased its expenses and pushed down its per-unit profits.

The COVID-19 pandemic has forced the company to furlough one-third of its staff and cut salaries for all remaining employees, the filing said. The company slashed vehicle prices to drive sales and reduce inventory, which succeeded in increasing sales but dented Vroom's profit per unit, according to the filing.

But Vroom said it started buying new inventory again about a month ago, with a focus on models that are in higher demand.

"We intend to strategically build our inventory levels in the near term to return to and ultimately exceed pre-COVID-19 levels," the filing said.

Some of Vroom's main backers include entities affiliated with investor L Catterton, venture capital shop General Catalyst Partners, Bill Gates-controlled Cascade Investment LLC, T. Rowe Price Associates Inc. and used-car dealership AutoNation.

Vroom's disclosures arrive as the IPO pipeline slowly starts to pick back up after weeks of low activity stemming from the coronavirus. Grocery chain Albertsons Cos. Inc. amended its IPO filing May 5 to include updated financial statements, a sign that it could be gearing up for a public offering, and Chinese on-demand delivery platform Dada Nexus Ltd. filed plans Tuesday for a U.S. IPO.

Representatives for Vroom did not immediately respond to a request for comment Tuesday.

Vroom is represented by Marc D. Jaffe, Ian D. Schuman and Courtenay Myers Lima of Latham & Watkins LLP.

The offering is underwritten by Goldman Sachs & Co. LLC, BofA Securities Inc., Allen & Co. LLC, Wells Fargo Securities LLC, Stifel Nicolaus & Co. Inc., William Blair & Co. LLC, Robert W. Baird & Co. Inc., JMP Securities LLC and Wedbush Securities Inc.

The underwriters are represented by Gregory A. Fernicola and Ryan J. Dzierniejko of Skadden Arps Slate Meagher & Flom LLP.

--Additional reporting by Tom Zanki. Editing by Orlando Lorenzo.

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